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Goldman Sachs recently caused a frenzy among its clients when the Wall Street powerhouse made some Facebook shares available to a small group of wealthy customers, and such has been the clamour that on Monday it reportedly decided to prohibit sales to U.S. customers. It's little wonder clients want to buy: The value of the social networking pioneer has been soaring, by some estimates up more than four fold in the past year to $50-billion (U.S.).

But it is possible to sidestep Goldman and get in on the action on Facebook, and other well-known private glamour names such as Twitter and Craigslist, without being on Goldman's list of preferred offshore clients.

Be forewarned, though. Purchasing the stock isn't easy, and unfortunately for ordinary investors, is available only to millionaires and institutional investors.

The stock trades through off-the-beaten path Internet sites that specialize in private company securities. Among the most popular are SecondMarket and SharesPost, both of which say they've been trading Facebook shares through online services available on their websites.

The stock that changes hands on these sites is typically from former employees who were granted shares and want to cash out, or from venture capitalists and other early investors who are unloading some of their stakes.

"As Facebook's price has risen, the interest in acquiring shares in Facebook has gotten greater and greater," said David Weir, chief executive officer of SharesPost, which is based in San Bruno, Calif., a suburb of San Francisco.

SharesPost held an auction in late December for 165,000 Facebook shares at a clearing price of $25, implying a company value roughly in line with the figures being bandied about as Goldman offers its stock, Mr. Weir said.

SecondMarket spokesman Mark Murphy said his firm is in the midst of an auction for about 200,000 shares. SecondMarket has a policy of not publicly divulging prices.

Individuals are permitted to buy private company stock through an exemption in U.S. regulations covering so-called accredited investors, those with a net worth of more than $1-million or an annual income of $200,000.

The loophole exists because people with relatively large sums of money are supposedly sophisticated enough to evaluate risk and take a loss if they're wrong - and consequently don't need to be mollycoddled by the same investor protections offered on publicly listed securities.

Wealthy Canadians can purchase stakes in U.S. private companies, provided they meet the net worth or income thresholds, although it's advisable to have a bank account south of the border to facilitate the payment of trades.

Attractive Alternative

Those involved in the trading say stock in private companies is attractive because it provides an entry into rapidly growing businesses at an early stage in their development. In past years, many of these companies would have made initial public offerings, but today find it more attractive to stay private, thus avoiding the extra regulatory costs of public entities and investor pressures to meet short-term profit targets.

"Facebook does tend to suck all the air out of the room these days," said Mr. Weir, "but I think what's most interesting about the secondary marketplace is that there are dozens and dozens of companies, in addition to Facebook, that represent very attractive growth-company investment opportunities and I think that's where a lot of the focus will transition once the frenzy over Facebook starts to die down a bit."

Mr. Murphy said SecondMarket is the firms' fastest-growing area, having completed about $400-million in private-company transactions in 2010 - a sign that many investors are comfortable in buying these securities.

The Mechanics

For investors used to trading on exchanges, the actual buying and selling of private securities might appear cumbersome.

When registering to trade, buyers have to affirm they are well-heeled enough to be considered accredited investors.

Posted prices sometimes can be bizarre. SharesPost recently had someone offering to sell Facebook shares at $40, but a buyer was willing to pay $66. Mr. Weir wasn't able to explain the difference, and said the firm has taken to using organized auctions for Facebook to determine where the true market-clearing price really is.

Commissions are also high. SharesPost charges 2 per cent to the seller, but the bank it uses for trades has $1,500 fees, payable by both buyer and seller. SecondMarket charges between 3 per cent and 5 per cent, split equally between the buyer and seller.

Mr. Murphy said trading is expensive because it's a document-intensive process that often involves legal opinions and other costs. "It's not 'point, click, execute' like you would on the New York Stock Exchange," he said.

There is one unusual hurdle to buying private shares. Unlike transactions on a stock exchange, where companies have no control over who buys their shares, private businesses can reject potential shareholders. The companies issuing the stock typically reserve a right of first refusal on sales, allowing them to vet who becomes shareholders.

Where the action is

Facebook shares are available on online marketplaces, but not everyone is eligible to buy.

Only those with more than $200,000 (U.S.) in annual income or $1-million in net worth are considered "accredited investors," who can avoid U.S. Securities and Exchange Commission rules protecting small investors.

SharesPost features Facebook stock, but the company isn't a registered broker dealer or exchange. Transaction costs are steep, including $1,500 in bank fees for buyers and sellers.

SecondMarket, a broker dealer regulated by the SEC, runs a market in private company shares. Facebook is its most liquid private company stock.

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